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Exercise 13-13 - Topic - Non Financial and Current Liabilities Ayayai Corporation offers enriched parental benefits...

Exercise 13-13 - Topic - Non Financial and Current Liabilities

Ayayai Corporation offers enriched parental benefits to its staff. While the government provides compensation based on Employment Insurance legislation for a period of 12 months, Ayayai increases the amounts received and extends the period of compensation. The benefit program tops up the amount received to 100% of the employee’s salary for the first 12 months, and pays the employee 70% of his or her full salary for another 6 months after the EI payments have stopped.
Zeinab Jolan, who earns $52,000 per year, announced to her manager in early June 2020 that she was expecting a baby in mid-November. On October 29, 2020, 9 weeks before the end of the calendar year and Ayayai’s fiscal year, Zeinab applied for and began her 18-month maternity leave. Assume that the Employment Insurance program pays her a maximum of $720 per week for 52 weeks.
For the purpose of this question, ignore any tax, CPP, and EI deductions when making payments to Zeinab.

A.) Prepare all entries that Ayayai Corporation must make during its 2020 fiscal year related to the parental benefits plan in regard to Zeinab Jolan.

Date Account Titles and Explanation Debit Credit
(Blank)
To record employee benefit expense
To record payment of parental leave benefits for one week

B.) Prepare one entry to summarize all entries that the company will make in 2021 relative to Zeinab Jolan’s leave.

Account Titles and Explanation Debit Credit

C.) Calculate the amount of parental benefits payable at December 31, 2020, and 2021.

2020 2021
Parental Leave Benefits Payable $ $


Explain how these amounts will be shown on Ayayai’s SFP. (Round answers to 0 decimal places, e.g. 5,275.)

2020 2021
Current liability $ $
Long-term liability $ $

Solutions

Expert Solution

A.) Prepare all entries that Ayayai Corporation must make during its 2020 fiscal year related to the parental benefits plan in regard to Zeinab Jolan.
Date Account Titles and Explanation Debit Credit * Salary for 12 months $      52,000.00
29-Oct-20 Employee Benefit Expense* $ 32,760.00 Less: employment insurance payments ($720 X 52 weeks) $     (37,440.00)
           Parental Leave Benefits Payable $ 32,760.00 Salary for 6 months at 75% ($52,000 X 6/12 X 70%) $      18,200.00
To record employee benefit expense Employee Benefit Expense $      32,760.00
29-Oct-20 Parental Leave Benefits Payable $      280.00
            Cash ($52,000 – $37,440) ÷ 52 weeks ) $      280.00
To record payment of parental leave benefits for one week
B.) Prepare one entry to summarize all entries that the company will make in 2021 relative to Zeinab Jolan’s leave. **Top up for one year ($52,000 – $37,440) $      14,560.00
Account Titles and Explanation Debit Credit Less: portion used in 2020 (9 weeks X $280) $       (2,520.00)
Parental Leave Benefits Payable** $ 18,340.00 Remaining 9 weeks at 75% of full pay  ($18,200 X 9/26) $        6,300.00
             Cash $ 18,340.00 Benefits paid during 2018 $      18,340.00
C.) Calculate the amount of parental benefits payable at December 31, 2020, and 2021.
2020 2021
Parental Leave Benefits Payable $32,760 – (9 weeks X $280) = $ 30,240.00 $
Parental Leave Benefits Payable $30,240 - $18340 $ 11,900.00
Explain how these amounts will be shown on Ayayai’s SFP. (Round answers to 0 decimal places, e.g. 5,275.)
2020 2021
Current liability $                                                           18,340.00
Long-term liability $ 11,900.00

ekkarill92 answered 1 year ago
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